Date of Hearing: June 26, 2019

ASSEMBLY COMMITTEE ON INSURANCE

Tom Daly, Chair

SBPCA Bill Id:SB 508

Author:(Leyva) – As Amended Ver:April 9, 2019

SENATE VOTE: 38-0

SUBJECT: Residential property insurance

SUMMARY: Requires insurers to provide mobilehome appropriate disclosures to mobilehome owners in the standard residential property insurance disclosure form. Specifically, this bill:

1. Requires an insurer, on or after July 1, 2020, to include a copy of the Bill of Rights when it issues a tenant’s policy, renter’s policy, or policy for an individually owned condominium unit when those polices do not provide dwelling structure coverage.
2. Clarifies that the insurer shall provide the Disclosure and Bill of Rights with policies covering individually owned mobilehome and condominium units that provide dwelling structure coverage.
3. Makes minor changes to the form of the disclosure document insurers are required to provide to property owners.

EXISTING LAW:

1. Requires an insurer to provide a copy of the California Residential Property Insurance Disclosure (“Disclosure”) to the insured when issuing a residential property insurance policy and every other year upon renewal.
2. Requires every Disclosure to be accompanied by the California Residential Property Insurance Bill of Rights (“Bill of Rights”) which provides critical information such as contact information for the insurer, an explanation for policy cancellation or nonrenewal, an explanation of policy limits, and a copy of the Unfair Practices Act.
3. Defines a residential property policy to include a policy insuring:
   1. Individually owned residential units of not more than four dwelling units,
   2. Individually owned condominium units and mobilehomes, or
   3. A tenant’s policy insuring personal contents of a residential unit.
4. Requires the Disclosure be sent when issuing a policy insuring an individually owned condominium that provides dwelling structure coverage.

FISCAL EFFECT: Undetermined. The bill is not tagged fiscal.

COMMENTS:

1. Purpose. According to the author, SB 508 clarifies that mobilehome and condominium residents must be informed about key aspects of their residential property insurance policies and their rights associated with their policy. Many California residents have endured back-to-back years of deadly and destructive wildfires that have resulted in over 25,000 structures being destroyed or damaged, including numerous mobilehome parks. Many of the victims of these disasters were not aware of their insurance information or rights and could not begin the process of rebuilding their homes. It is important that all homeowners and renters, including those who live in mobilehomes and condominiums, be informed of their rights under the California Residential Property Insurance Bill of Rights.
2. Background. The basic homeowners’ insurance disclosure form has been required since 1992, adopted in the aftermath of the Oakland Hills fire. The basic purpose of the disclosure document is to ensure that homeowners know about the different types of insurance policies that are available in the market, and what their rights as a homeowners’ insurance policyholder are. Over time, the disclosure has been amended in minor ways, but notably, mobilehome owners have not been specifically included in the scope of the disclosure requirement. This bill simply adds mobilehome owners to the class of homeowner entitled to receive these standard disclosures.
3. Stakeholder process. The author reached out to stakeholders and the Department of Insurance (DOI) to seek a consensus on how best to add mobilehomes to the existing statute. The bill in its current for reflects an agreement between the DOI and insurers that sell mobilehome insurance on the best way to implement these new requirements, including a 6-month delayed implementation date to allow insurers time to modify their systems.
   

REGISTERED SUPPORT / OPPOSITION:

Support

AARP California

Ricardo Lara, Insurance Commissioner

Opposition

None received

Analysis Prepared by: Paul Riches / INS. / (916) 319-2086

 CONSENT  

Bill No: SB 508

Author: Leyva (D)

Amended: 4/9/19

Vote: 21

SENATE INSURANCE COMMITTEE: 13-0, 4/24/19

AYES: Rubio, Jones, Archuleta, Bates, Borgeas, Dodd, Galgiani, Glazer, Hueso, Mitchell, Moorlach, Portantino, Roth

SUBJECT: Residential property insurance

SOURCE: California Department of Insurance

DIGEST:

This bill clarifies when an insurer must provide copies of the Residential Property Insurance Disclosure and the California Residential Property Insurance Bill of Rights when it issues specified types of residential property insurance policies.

ANALYSIS:

Existing law:

1. Requires an insurer to provide a copy of the California Residential Property Insurance Disclosure (“Disclosure”) to the insured when issuing a residential property insurance policy and every other year upon renewal.
2. Requires the California Residential Property Insurance Bill of Rights (“Bill of Rights”) to accompany every Disclosure. The Bill of Rights provides important information such as contact information for the insurer, an explanation for policy cancellation or nonrenewal, an explanation of policy limits, and a copy of the Unfair Practices Act.
3. Defines a residential property policy to include a policy insuring:
   1. Individually owned residential units of not more than four dwelling units;
   2. Individually owned condominium units and mobilehomes; or
   3. A tenant’s policy insuring personal contents of a residential unit.
4. Requires the Disclosure be sent when issuing a policy insuring an individually owned condominium that provides dwelling structure coverage.

This bill:

1. Recasts the provisions related to those policies that do not include the Disclosure and those that must be accompanied by the Bill of Rights.
2. Requires an insurer, on or after July 1, 2020, to include a copy of the Bill of Rights when it issues a tenant’s policy, renter’s policy, or policy for an individually owned condominium unit when those polices do not provide dwelling structure coverage.
3. Clarifies that the insurer shall provide the Disclosure and Bill of Rights with policies covering individually owned mobilehome and condominium units that provide dwelling structure coverage.

Comments

The Disclosure is a two page document that provides important general information about residential property insurance in an easy to read format. By providing a concise summary and including contact information for questions, it helps prepare a consumer to decide what type and amount of coverage they need. Generally, it defines and explains the different types of coverages including replacement cost coverage to repair or replace the dwelling. It also provides a critical warning to the consumer about the risk of being underinsured after a disaster.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 4/30/19)

California Department of Insurance (source)

California Alliance for Retired Americans

Golden State Manufactured-Home Owners League

OPPOSITION: (Verified 4/30/19)

None received

ARGUMENTS IN SUPPORT: According to the author:

SB 508 clarifies that mobilehome and condominium residents must be informed about key aspects of their residential property insurance policies and their rights associated with their policy. Many California residents have endured back-to-back years of deadly and destructive wildfires that have resulted in over 25,000 structures being destroyed or damaged, including numerous mobilehome parks. Many of the victims of these disasters were not aware of their insurance information or rights and could not begin the process of rebuilding their homes. It is important that all homeowners and renters, including those who live in mobilehomes and condominiums, be informed of their rights under the California Residential Property Insurance Bill of Rights.

Insurance Commissioner, Ricardo Lara supports this bill because the insurance industry does not consistently interpret existing law. Additionally, current law does not require the Bill of Rights to be provided to renters and condominium owners because their policies do not include dwelling coverage. He believes that the information in the Bill of Rights is necessary for these consumers in making informed decisions about their coverage.

Prepared by: Brian Flemmer / INS. / (916) 651-4110

5/1/19 14:41:24

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SENATE COMMITTEE ON INSURANCE

Senator Susan Rubio, Chair

2019 - 2020 Regular

Bill No: SB 508 Hearing Date: April 24, 2019

SUBJECT: Residential property insurance

DIGEST:

Clarifies when an insurer must provide copies of the Residential Property Insurance Disclosure and the California Residential Property Insurance Bill of Rights when it issues specified types of residential property insurance policies.

ANALYSIS:

Existing law:

1. Requires an insurer to provide a copy of the California Residential Property Insurance Disclosure (“Disclosure”) to the insured when issuing a residential property insurance policy and every other year upon renewal.
2. Requires every Disclosure to be accompanied by the California Residential Property Insurance Bill of Rights (“Bill of Rights”) which provides critical information such as contact information for the insurer, an explanation for policy cancellation or nonrenewal, an explanation of policy limits, and a copy of the Unfair Practices Act.
3. Defines a residential property policy to include a policy insuring:
   1. Individually owned residential units of not more than four dwelling units,
   2. Individually owned condominium units and mobilehomes, or
   3. A tenant’s policy insuring personal contents of a residential unit.
4. Requires the Disclosure be sent when issuing a policy insuring an individually owned condominium that provides dwelling structure coverage.

This bill:

1. Recasts the provisions related to those policies that do not include the Disclosure and those that must be accompanied by the Bill of Rights.
2. Requires an insurer, on or after July 1, 2020, to include a copy of the Bill of Rights when it issues a tenant’s policy, renter’s policy, or policy for an individually owned condominium unit when those polices do not provide dwelling structure coverage.
3. Clarifies that the insurer shall provide the Disclosure and Bill of Rights with policies covering individually owned mobilehome and condominium units that provide dwelling structure coverage.

Background

According to the author:

SB 508 clarifies that mobilehome and condominium residents must be informed about key aspects of their residential property insurance policies and their rights associated with their policy. Many California residents have endured back-to-back years of deadly and destructive wildfires that have resulted in over 25,000 structures being destroyed or damaged, including numerous mobilehome parks. Many of the victims of these disasters were not aware of their insurance information or rights and could not begin the process of rebuilding their homes. It is important that all homeowners and renters, including those who live in mobilehomes and condominiums, be informed of their rights under the California Residential Property Insurance Bill of Rights.

The Disclosure is a two page document that provides important general information about residential property insurance in an easy to read format. By providing a concise summary and including contact information for questions, it helps prepare a consumer to decide what type and amount of coverage they need. Generally it defines and explains the different types of coverages including replacement cost coverage to repair or replace the dwelling. It also provides a critical warning to the consumer about the risk of being underinsured after a disaster.

Many of these explanations relate to dwelling coverage that is not included in some types of residential policies, such as renter and tenant’s policies and condominium polices. It is not necessary to explain terms regarding the replacement of the dwelling if the insured does not own the property.

Existing law attempts to direct which type of policyholder should get which document based on the interest the insured has in the property, but the current approach has caused a great deal of confusion. This bill merely clarifies who gets what.

ARGUMENTS IN SUPPORT:

Insurance Commissioner, Ricardo Lara supports this bill because the insurance industry does not consistently interpret existing law. Additionally, current law does not require the Bill of Rights to be provided to renters and condominium owners because their policies do not include dwelling coverage. He believes that the information in the Bill of Rights is necessary for these consumers in making informed decisions about their coverage.

SUPPORT:

California Department of Insurance (source)

California Alliance for Retired Americans

Golden State Manufactured-home Owners League

OPPOSITION:

None received.

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